In today’s video of Startup 101 series, we talk about startup accelerators and incubators, what is the difference between an accelerator and an incubator, benefits of being a part of accelerators and incubators and should you join an accelerator or an incubator program.
00:00 Introduction
00:42 Incubators vs Accelerators
02:27 Benefits of Incubators and Accelerators
05:11 Should you join an Incubator or Accelerator?
What is a startup incubator?
A startup incubator usually helps early-stage startups that are still in their idea phase and yet to develop their product. Which means that they don’t have any revenues. These incubators are usually run by universities or the government and they usually operate on grants. And that is one of the reasons why most of them don’t charge the entrepreneur anything. Since an entrepreneur needs complete support during the incubation period, these programs usually run for longer durations lasting anywhere between 6 months to 2 years.
Examples of Incubators run by state governments in India include T-Hub by Telangana, Startup Village in Kerala, and iCreate in Gujarat.
What is a startup accelerator?
Unlike incubators that help very early-stage startups, accelerators help startups that already have their product and have started generating some revenues. These accelerators then help the startups to scale and grow by finding product-market fit, provide mentoring, and funding support. Accelerator programs usually last for shorter durations anywhere between 2 weeks to 6 months. While incubators don’t charge the startups anything, accelerators usually take up some equity for providing their support.
Examples of global accelerators include Y Combinator, Sequoia Surge and 500 Startups.
Difference between Incubators and Accelerators?
Since most incubators are usually located in the universities, students who are looking to start their first startup and have no idea how to go about doing it can take the opportunity to work on their ideas at these incubators to get their minimum viable product and formulate a business plan. Incubators do this by connecting these young entrepreneurs with seasoned entrepreneurs, experts and mentors who can guide them during the first part of their journey. Apart from that, since your startup doesn’t really have enough funds to get an office space, they also offer working space, where you can collaborate and learn from other entrepreneurs while building your startup.
The most striking difference between incubators and accelerators is that while incubators don’t usually charge anything, accelerators often ask for some equity from an entrepreneur for providing their services. Unlike incubators where anyone can get in, accelerators programs are not easy to get in and less than 2% of all the applicants are selected to be a part of some of the leading accelerators programs like Y Combinator or Techstar. While accelerators offering pretty much everything that is offered by an incubator although for a shorter period of time, startups in accelerators programs are usually assured some funding, unlike incubators where an entrepreneur has to first prove the ability of their startup.
Should you join an incubator or an accelerator program?
Considering that incubator programs are usually free, it might be a great idea for a first-time entrepreneur to actually get into an incubator program and speed up their learning while making new connections that could help them in their entrepreneurial journey.
However, deciding if an accelerator program is good for you can be a little tricky. Accelerators offer easy funding, VC connections and ability to scale quickly which can really help an entrepreneur to grow their business at a rapid pace. But what you might want to keep in mind is that they usually charge between 8-10% of equity for around Rs 30-50 lakh ($50,000-$70,000). It is really up to the entrepreneur to decide if they are willing to part with such large equity at the start of their entrepreneurial journey as giving too much equity, too early can have some issue in the future. If you think you can scale your startup without the need for an accelerator, it would be advisable to not go for an accelerator. However, if you do need the support and you are comfortable parting with some equity, there is no harm as accelerators certainly help a startup to scale rapidly.
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